Wednesday, June 20, 2012

What will the Fed Do?-- Analysts Weigh In

...MarketBeat contracted wtih Mr. Spock to have him visit the various
Wall Street shops to extract their expectations for the Fed today, via
his well know mind-meld techniques. Here’s what he found.

Deutsche Bank: Our view for Wednesday’s
FOMC statement is that at best we will get a soft Twist – smaller
duration takeout, but not QE3. We think the Fed should be more
aggressive, but Fed language does not suggest that they are there yet.

Goldman Sachs: Our confidence that the FOMC will
ease policy once more at the June 19-20 meeting has also grown. At a
time when Fed officials are far short of their dual mandate of maximum
employment and 2% inflation, financial conditions should be
accommodative and GDP growth should be well above trend in order to
re-employ displaced workers and avoid a gradual transformation of
cyclical into structural unemployment.

Barclays Capital: Markets have been treading water
ahead of the FOMC decision. We expect an extension of Operation Twist
but no further expansion of the Fed’s balance sheet. However, we expect
the Fed’s economic projections and Chairman Bernanke’s press conference
to have a dovish slant. This could lead to volatile prices. With some
expectation of QE3 priced in, the decision could be a negative surprise
to markets, resulting in a USD rally, but the press conference could
then support risky asset prices, in our view. We recommend being long
the USD ahead of the decision, but closing those positions before the
press conference....